On Monday, the price of oil declined due to worries surrounding the demand for fuel in the United States and China. This offset the optimism by the potential impact of OPEC+ production cuts and the restart of U.S. purchases for reserves, which could lead to a tightening of oil supplies.
At 0130 GMT, Brent crude futures experienced a decrease of 43 cents, equivalent to 0.6%, settling at $73.74 per barrel. U.S. West Texas Intermediate crude stood at $69.67 per barrel, marking a decline of 37 cents, or 0.5%.
Over the past week, both benchmarks experienced a decline for the fourth consecutive time. This was primarily driven by concerns that the United States might face a recession due to the “significant risk” of a historic default occurring in the first two weeks of June.
Amidst uncertainty, investors turned to safe options like the U.S. dollar. This upward trend in the dollar’s value caused an increase in the price of dollar-denominated commodities for holders of alternative currencies.
“Oil prices are still under pressure on sluggish demand outlooks as China’s economic reopening progress seems bumpy,” said CMC Markets analyst Tina Teng, adding that the collapse of the U.S. banking system has also contributed to market unease.
She also noted that in the coming week, investors will be looking closely at China’s economic statistics, including industrial output, fixed assets investment, and retail sales, for indications of rising oil demand.
“With the uneven re-opening in China and concerns that the U.S is facing a growth slowdown at a time when the X-date for the debt ceiling is rapidly approaching, topped off by a rally in the U.S dollar, market sentiment towards crude oil will remain tepid at best,” stated IG analyst Tony Sycamore.